Stricter emission standards more effective in decarbonisation than ETS

Peter Vajda, Environmental Expert at the Energy Community Secretariat, explains in an interview for the Balkan Green Energy News how the recently adopted stricter standards for large combustion plants will impact the EU energy sector, both in terms of fossil fuel fired power plants and renewable energy sector, and why they are more effective in decarbonisation then Emission Trading Scheme. He also explains what this step means for the Energy Community Contracting Parties which are expected to start implementing EU regulations on large combustion plants as of the next year.

The stricter rules for large combustion plants have been recently introduced in the EU in order to scale down air pollution. How will this affect the energy sector in the EU, especially the coal plants? Is this really “the end of the road” for many coal plants, as some environmentalists say?

The conclusions on the best available techniques (BAT conclusions) for large combustion plants were indeed adopted earlier this year in the EU, which automatically triggers a permit review procedure under the Industrial Emissions Directive (IED), to be completed within four years for existing plants.

The new rules tighten the existing emission standards for power plants firing fossil fuels and the operators of these plants will have to assess whether it will be technically and economically feasible for those plants to remain operational. In certain cases, these assessments may indeed result in a conclusion that the plant has to be shut down.

What the large plants will have to do to fulfill these requirements and keep the permits? Does it mean that the older and less profitable coal plants will have to be shut down? Do you expect that this will boost the renewable energy sector?

All plants covered by the scope of the IED (thermal power plants with a rated thermal input equal to or greater than 50 MW) will have to have their permits reconsidered and, if necessary, updated in light of the new BAT conclusions by mid-2021.

By increasing the investment costs of either the construction of new fossil fuel fired thermal power plants or retrofitting old ones, the emission standards have in fact indirectly put a price tag on coal, oil and gas and thus created a stronger business case for alternative energy generation facilities. Such command-and-control regulation as the stricter emission standards of the IED have in fact been more effective in decarbonzing the energy sector and promoting “green investment” than the EU Emission Trading Scheme with the current low carbon price.

In addition to the regulatory aspect, the decision whether or not to close a power plant may also be linked to a country’s overall climate and decarbonization objectives.

On the other hand, what are the expected benefits in the field of the environment, are there any projections how this will contribute to the air quality?

There are a number of studies that assess the potential health and environmental benefits of emission reduction. Generally speaking, reducing emissions of SO2, NOx and dust (the main pollutants from fossil fuel fired power plants) results in people living healthier and longer lives. Therefore, any investment in emission reduction – either via emission abatement technologies, energy efficiency or alternative generation capacities – is also an investment in the quality of life.

The Energy Community Secretariat, in its own assessment, estimated a return on investment ratio of more than 15, meaning that every unit of investment is expected to bring more than 15 units of benefits. The main reason for this is the baseline effect – currently, a large majority of power plants in the Contracting Parties have very high emission levels.

At the same, it is common knowledge that emission reduction comes at a price, and in many transition economies such as those of the Energy Community Contracting Parties, citizens are very cost-sensitive, it is thus vital that initiatives for emission abatement receive broad public support.

What does the introduction of new standards mean for the Energy Community Contracting Parties, when will they have to implement those rules and standards? What are the Energy Community Secretariat’s plans regarding this?

In the Energy Community, Contracting Parties are just about to start with the implementation of the Large Combustion Plants Directive (one of the predecessors of the IED) in the beginning of 2018. This means that the new EU standards (BAT conclusions) are not yet applicable in the Contracting Parties. At the same time, the European Commission is currently working on a Recommendation on the implementation of these provisions of the IED in the Energy Community, which is to be discussed at this year’s Ministerial Council in December.

Nevertheless, I must highlight that even the implementation of the existing rules in the Energy Community, that is about to start as of 1 January 2018, presents a challenge for the Contracting Parties.

Five Contracting Parties (Bosnia and Herzegovina, Kosovo*, former Yugoslav Republic of Macedonia, Serbia and Ukraine) decided to adopt a so-called National Emission Reduction Plan, which means that plants will be treated in a group rather than individually.

In 2016, the Ministerial Council also adopted a decision on a list of plants that can be subject to limited lifetime derogation (also known as “opt-out”). If a plant features on this list, it means that it can remain operational for a maximum of 20,000 hours after 1 January 2018, should the operator decide to start with this regime on that date. If the plant reaches the 20,000 operational hours, or in any case on 31 December 2023, opted-out plants have to be shut down.